Sunday, 15 November 2015

Racing politics around the 55th Levy Scheme can be difficult for most of us to comprehend, but there have been a number of very significant and really positive developments recently reflecting months of hard work, particularly from CEO Nick Rust and Chairman Steve Harman of the British Horseracing Authority (BHA) in conjunction with the Racecourse Association (RA) and Horsemen’s Group (HG).

While we don’t yet have an enforceable horserace betting right, we do have a new tripartite governance structure underpinned by a signed Members’ Agreement; a Members’ Committee representing the BHA, RA and HG, meeting quarterly; and an Executive Committee dealing with the implementation of strategy, meeting monthly. Credit where credit is due: this is potentially a milestone moment that will dramatically improve and strengthen decision-making and introduce a far more coherent and unified approach, with British racing able to speak with one voice and hopefully rise above the infighting of the past. Obviously there will be some big challenges to address, not least over the race programme and fixtures. Indeed Nick Rust has insisted that the agreement will only be in place initially for 18 months, and the next step forward will be dependent on a Memorandum of Understanding on the reshaping of fixtures – which, of course, goes right to the heart of the economic model of racecourses.

It sounds complex stuff, but it is all part of a genuinely strategic approach to the strengthening and growth of British Racing. Nick Rust has made a couple of TV appearances recently in which he emphasised the need to achieve three easily understandable goals: increase the number of racegoers, increase the volume of betting, increase the number of horses in training. Central to all of that is clearly the need for investment and funding across the sport, which is why bringing the bookmakers to the strategic party in the right way is so critically important.

Alas, while the developments mentioned above are a very big step forward, the breakdown on 31st October in the negotiations over the Levy for 2016/17 was definitely a big step back – at least in the short term. Basically about 40% of all bets by UK customers on British racing are not contributing anything at all to the sport or its workforce. Normally on a £10 bet, about 15p makes its way into racing. At the moment there is zero contribution to the levy from the digital, offshore businesses, and that is an estimated £30m currently being lost. The effect of the haemorrhaging of levy in this way is likely to reduce the levy yield from around £100m to £50m or lower by 2017, which is clearly going to have a hugely significant impact on racing, not least on prize-money for owners, which as we know is already at the bottom of the returns on ownership in any of the racing territories worldwide.

With the negotiations having broken down, the matter has had to be referred to the Government in the form of John Whittingdale, the Minister at the Department for Culture, Media & Sport, for determination. This is the last thing British racing wanted, since it shouldn’t be the Government’s job to sort out our problems. Having said that, there is apparently a lot of support for racing and, indeed, the Chancellor, in this year’s Budget, pledged that the Government will support a new Horserace Betting Right to replace the outdated levy mechanism.

The 55-year-old levy scheme is clearly nowhere near fit for purpose. Some would even argue that it rarely has been, since it started. The way that it was set up and operated has enabled bookies to under-pay for decades. Increasingly they have put out a smokescreen that the racing betting product is far less important than it used to be, but Nick Rust, as an ex-Ladbrokes man, is now poacher turned gamekeeper and knows the inherent nonsense of that statement. Racing is the only sport that provides a 7-day, worldwide betting product. It is inherently profitable but has the powerful advantage of bringing in punters to bet on other offerings. It is that leveraging of revenue which is at the heart of potentially huge growth for bookmakers if they could move away from denial and squabbling over the levy to a far more strategic debate about how to stimulate innovation in gambling and harness the enormous global market into and through the best racing in the world.

However, the bookies must make an appropriate contribution to British racing. One lever therefore is ongoing persuasion and negotiation, but the other is to be more coercive. So another significant development over the last month shows the huge benefit of having a Tripartite Agreement. British Racing – BHA, RA, HG – has introduced a new designation of “Authorised Betting Partner” (ABP) for bookmakers who “have a fair and mutually sustainable funding relationship with the sport”. This comes in on 1st January, and there are three firms already with that status: 32 Red, bet 365 and Betfair, because they are paying voluntarily on their digital businesses or, like Betfair, have a commercial deal in place. That is not the case with the likes of Betfred, Coral, Ladbrokes or William Hill. Although there was a voluntary agreement several years ago under which bookmakers committed to £18m of such contributions, only £4.5m has so far found its way into racing. All of this demonstrates that racing cannot rely on voluntary payments, and it must be underpinned by legally binding funding requirements – hence the need for an enforceable Horserace Betting Right. In future, if a bookmaker is not an ABP, because they are not paying levy or an agreed equivalent on their digital business, they will be banned from taking out new sponsorship deals on most races and festivals. Encouragingly both Jockey Club Racecourses and Arena Racing Company, who operate half the UK racecourses and 60% of the fixtures, have already stated that they will not enter into new commercial agreements with bookies that are not ABPs.

While the structural side of all of this is clearly complex, the basic goals, levers and requirements are straightforward. As this blog was written mid-way through the Paddy Power meeting at Cheltenham, it is to be hoped that the bookmakers change their behaviour, finally get behind racing’s strategy for growth and accept the need for a proper, sustainable contribution. At the moment, taking Paddy Power as an example, their initial reaction has been to question the legality of the ABP sponsorship model. Who knows, maybe it won’t be that long before Cheltenham is looking for a new sponsor.

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Sunday, 1 November 2015

If there are any certainties in life other than death and taxes, it is that owners and trainers will always argue that their horses have been badly treated by the handicapper. We always feel that as with golf handicaps we’re penalised quickly for decent performances while the official handicapper only reduces the penalties at a glacial pace. Recently one of our horses, He’s A Bully, a 13-race maiden, went up 7lbs for coming second. I thought this was very harsh, as did all the owners and connections. Having had quite a whinge about it, the horse duly won his next race by 9 lengths! But we had to run him before he could be re-handicapped, so for Owners for Owners there was a happy ending to the grumble and, indeed, the mark then stayed the same.

Throughout the intervening week between the 7lb hike and winning the race, there was a lot of discussion in our owner network about He’s A Bully, basically along the lines of how harsh it is to put up a maiden for not winning. Surely any horse should be entitled to win a race before being punished? There were even more painful examples however where the handicapper has put up horses significantly for not even completing races. Again, just because a horse is going well but then falls over, say, at the final fence, surely it is overly harsh to raise the mark without even getting home.

That line of discussion got me thinking more about the handicapping system, and the core principles behind it. On the BHA web site there is a detailed guide to handicapping which contains nine formal aims:

To achieve a competitive race with a close finish with a view to providing an exciting sporting spectacle.

To ensure that every horse’s handicap rating gives it a theoretical equal chance of success on its best recent form under its optimum conditions.

To set an interesting puzzle that the public find intriguing to solve.

To aim for competitive betting in handicap races, thereby indicating that the public believe that horses have a reasonable chance of success.

To re-evaluate ratings after a race so that horses that have raced competitively together are weighted to, theoretically, equalise the form if they were to meet next time they ran.

To reduce the rating of horses which appear to be deteriorating with a view to giving them a fair chance of success.

To favour the majority at the expense of the minority. If one horse is rated too highly, then that one horse may not have an equal chance of success on its next start. If one horse is rated too low, however, then every horse it races against may not have an equal chance of success on their next start.

To keep the median ratings of all horses on file as consistent as possible with previous years. Both ‘slippage’ and ‘uppage’ within the overall rating file are undesirable as they can lead to a mismatch between the racing population and the race programme.

To be as open as possible with trainers and owners seeking information about their horse’s handicap rating.

You’ll see that owners only get one mention, and quite clearly all the aims are essentially to do with racing as a spectacle, and particularly betting. But as regular readers of this blog will know, the owners are the number one stakeholders in racing, making the greatest financial contribution. Nick Rust, Chief Executive of the BHA, is leading the drive to bring owners into the sport and for there to be an additional 1,000 horses in training by 2020. The other side of the coin, of course, is what to do about retaining owners who leave racing for all sorts of reasons.

Unfortunately there is very little properly gathered data examining the churn rate of owners, and I’ve certainly never seen anything at all that examines the frustration and disillusionment that can set in due to horses being handicapped to a level where it is just about impossible for them to win. Similarly I am not aware of any study having been made of owners quitting the sport and selling / retiring their horses as a result of inappropriately high handicapping. However, anecdotal evidence abounds on this subject and a number of trainers’ blogs definitely argue that the principles of handicapping are a contributing factor to high churn rates. To what extent should there be a formal aim of handicapping that focuses on the requirement to retain owners in the sport through ensuring that their horses can win or be placed a sufficient number of times? Do let me know your views on this subject. After all, there is no point pursuing expensive marketing initiatives to bring owners into the sport if it is driving them out through inappropriate handicapping of their horses.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for
sharing them.